Study Suggests, Backers Deny Blackwell TEL Would Put Workers’ Compensation Funds at Risk

Gongwer News Service - July 26, 2005

Gongwer News Service

Opponents hope they have identified at least one fatal flaw in a proposed constitutional state spending limit backed by Secretary of State J. Kenneth Blackwell, but a Citizens for Tax Reform spokesman defended the plan Tuesday against the latest critique.

The Policy Matters Ohio study of the tax expenditure limit (TEL) being pushed for the Nov. 8 ballot cites several potential problems with the proposal, including its possible impact on the Bureau of Workers’ Compensation fund, motor fuel taxes, lottery proceeds and local government funding.

The BWC implications – that employer payments would be subjected to year-end unencumbered funds transfers mandated in the constitution – could be especially onerous for TEL backers given the unfolding investment scandal and ensuing media scrutiny
enveloping the bureau. However, CTR spokesman Gene Pierce dismissed the Policy Matters warnings as “grasping for straws.”

“Our law says it covers taxes, licenses fees and sales. It doesn’t cover the BWC because those are premiums,” Mr. Pierce said. “They should read before they scream.”

Policy Matters Research Analyst Jon Honeck, the study’s author, said the language cited by Mr. Pierce is in a separate section describing what would be subject to the spending cap. Additionally, state and federal case law could point to BWC premiums being considered a tax or fee, he said.

Either way, the language at question is among several potential flaws in the proposed constitutional amendment that are open to different interpretations, will likely be decided in the courts and make its adoption a bad idea for state and local governments, Mr. Honeck said. “It’s an issue that would have to be litigated like many others in this proposal.”

Given its recent status as a lightning rod for political rhetoric and media attention, the BWC tie-in could prove to be irresistible to opponents in a ballot campaign should the issue make it that far. (Some of Mr. Blackwell’s fellow Republicans have been privately pushing to alter the proposal and delay it until 2006. See Gongwer Ohio Report, July 22, 2005.)

“Certainly, we’ll point to that, but we’ll point to a lot of these things,” said Dale Butland, spokesman for the Coalition for Ohio’s Future, a group of several dozen government program advocacy organizations in opposition to the TEL.

“It’s indicative of the sloppiness with which this thing was written,” Mr. Butland said. “There may be a host of other unintended consequences that voters will take into account if this thing is on the ballot.

The coalition has already attacked the plan on the basis of its potential impacts to essential services and higher education and its likely negative effect on government programs and budget management. The group has pointed to problems that have surfaced over the years with a similar state constitutional amendment passed by Colorado voters, but claims the Blackwell model goes even further in superseding current state and local government oversight.

Mr. Honeck said his group is not an official member of the coalition although he acknowledged, “We are in touch with those folks.”

Asked if CRT was leery of attack ads highlighting the BWC claims, Mr. Pierce said Mr. Blackwell testified against the mid-1990s legislation that loosened the BWC’s investment guidelines, thus resulting in the ill-conceived coin fund and other questionable investments that have come to light in recent months.

“There should be no doubt about Ken’s position on workers’ comp,” Mr. Pierce said. In regards to the amendment’s potential impacts to the motor fuel tax, however, he said: “I’m not sure there’s a problem with that one” given the gas tax rate. “I’m sure voters and taxpayers would appreciate more attention” to gas taxes, he said.

Mr. Honeck notes in the Policy Matters Ohio study that many of the plan’s flaws as researchers see it trace to the fact that it would supersede other constitutional edicts.

“The supremacy clause was not present in the two earlier versions of the amendment. The full implications of this sweeping provision cannot be known in advance,” the study states. “Potential conflicts exist with constitutional sections that limit the uses of workers’
compensation funds and motor fuel taxes, and with the home rule power of charter municipalities.”

The study also notes:

–The TEL imposes an overall cap on state spending and a separate spending cap for each local government that applies not just to the expenditure of tax revenue, but also to revenues raised from certain voluntary transactions such as lottery ticket sales.

–Significant portions of state four-year university spending may be subject to the aggregate state spending cap, including tuition, fees, and sales of tickets to sports and entertainment events.

–The TEL’s requirement that the state pay for mandates on political subdivisions fails to define the term “mandate,” thus opening the section up to litigation.

–The tax refund mechanism would pool revenue from many different taxes and fees and will give it to individuals who paid the income tax.

–The TEL does not specify how to implement the spending cap formula in school districts and other taxing districts that cross political boundaries.

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